by Devon Funds
By Paul Glass, Founder Devon Funds Management
While SpaceX is unquestionably a real and highly successful business, aspects of the current investment narrative bear a striking resemblance to the enthusiasm that surrounded Britain's South Sea Company during the famous South Sea Bubble of 1720.
The South Sea Company was founded in 1711 and promised investors access to vast trading opportunities in South America. In practice, the company generated relatively little commercial success. Instead, its soaring valuation became increasingly driven by investor belief in a future that seemed almost limitless. Shares rose from around £100 to nearly £1,000 in 1720 before eventually collapsing when expectations outran reality.
SpaceX is fundamentally different in one critical respect: it possesses a substantial operating businesses. The company dominates global orbital launches, operates the rapidly growing Starlink satellite network, and has generated billions of dollars in annual revenue. Unlike the South Sea Company, SpaceX's underlying business is not a fiction.
However, similarities emerge when examining how investors justify valuation. At approximately US$18.7 billion of reported revenue, a US$1.8 trillion valuation implies a revenue multiple that would be extraordinary by historical standards. In 2025 SpaceX posted an earnings loss of almost US$5 billion and consumes a huge amount of cash to keep its operation going. Investors are clearly not valuing SpaceX based solely on today's earnings or cash flows. Instead, they are paying for a vision many, many years into the future.
Much like South Sea investors who imagined immense wealth flowing from South American trade, SpaceX investors are being asked to capitalise opportunities that remain largely unproven.
Another similarity lies in the role of narrative.
During the South Sea Bubble, enthusiasm became self-reinforcing as rising share prices attracted more investors. Today, SpaceX benefits from a compelling story centered on technological revolution, artificial intelligence, space exploration, and the reputation of Elon Musk. As with all speculative episodes, the stronger the narrative becomes, the easier it is for investors to overlook the uncertainties embedded within it.
This does not mean SpaceX is destined to experience the fate of the South Sea Company. Indeed, SpaceX has already achieved technological feats that many experts once considered impossible. Starlink alone may ultimately justify a valuation greater than many of the world's largest telecommunications companies.
The company has genuine competitive advantages and real economic value.
Nevertheless, history reminds investors that extraordinary businesses can still become extraordinarily overvalued.
The key lesson of the South Sea Bubble is not that ambitious visions are always wrong, but that investors often become willing to pay almost any price for them. The question facing prospective SpaceX shareholders is therefore not whether the company is remarkable, it clearly is, but whether its future success is already fully reflected in a valuation approaching two trillion dollars.
In that sense, the comparison with the South Sea Bubble serves as a useful warning. Both cases involve investors placing enormous value on future possibilities. The difference is that SpaceX starts with a far stronger foundation. Whether that foundation is sufficient to justify its valuation remains one of the most important investment debates of the decade.
The upcoming mega IPO’s of SpaceX, Anthropic and OpenAI, which are reportedly collectively being valued at close to US$4 trillion, are unlike anything that we have seen in history. Historically market peaks have often coincided with frothy IPO’s. Additionally, market concentration is now at an all-time high, with the top 10 US stocks now accounting for a staggering 40% of total US stock market valuation. Now may be a sensible time for investors to follow Warren Buffett’s adage on market psychology, “be fearful when others are greedy and greedy when others are fearful”.
Devon Funds Management is an independent investment management business that specialises in building investment portfolios for its clients. Devon was established in March 2010 following the acquisition of the asset management business of Goldman Sachs JBWere NZ Limited. Devon operates a value-oriented investment style, with a strong focus on responsible investing. Devon manages six retail funds covering across the universe of New Zealand and Australian, equities and has three relatively new international strategies with a heavy ESG tilt. For more information please visit www.devonfunds.co.nz
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